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Phuket hotels ‘need immediate help to survive upcoming high season’

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Phuket’s hotel industry is reaching breaking point and the government needs to step in and offer serious economic support to help it survive the upcoming high season, industry leaders said.

Despite plans to reopen the island to international travellers under the “Phuket Model”, reality is biting back as hotels are unable to sustain operating viability based on domestic tourism.

According to the Airports of Thailand (AOT), arrivals have dropped 65 per cent year on year in the first seven months of this year.

What is clear is that the 86,000 rooms in Phuket's registered accommodation establishments cannot realistically break-even or even be cash-flow positive with only domestic demand. This realistically could set the scene for 50,000 job losses in the hotel sector this year if there's no support forth coming or international visitors are not allowed in.

One of the green shoots is the government’s Alternative Local State Quarantine (ALSQ) programme, for which more than 60 properties have applied. While this scheme is meant to emulate the ASQ programme in Bangkok, it will not help unless the government ensures the return of international travellers. Though this may take months to materialise.

Anthony Lark, president of the 78-property strong Phuket Hotels Association, said: “The math simply doesn’t work with single-digit occupancies being reported. No amount of induced local demand can prevent the continued loss of jobs and rapidly eroding financial crisis for owners and operators. We strongly advocate a safe, pragmatic, and strategic reopening for foreign travellers.”

Data recently released by hospitality consulting group C9 Hotelworks also showed that 69 per cent of hotel development plans in the pipeline have been delayed or put on hold.

As of the end of 2019, there were 1,758 licensed accommodation establishments on the island, while today incoming projects stand at 58 hotels or just a 19 per cent increase in supply with 16,476 additional rooms planned.

“Thailand’s failure to relaunch overseas tourism creates a dangerously perilous scenario for Phuket’s hospitality industry,” said C9 Hotelworks managing director Bill Barnett.

“The domino financial impact is not only on hotels and the expanded tourism sector, but it suffocates the development pipeline. This will negatively trigger the erosion of jobs in construction, real estate, retail and ultimately be manifested in consumer credit defaults. The situation is bad, and likely to get worse, as operating hotels remain incur losses day in and day out.”

While a stark warning was issued last week by the Bank of Thailand (BOT) over the potential disruption to the tourism-dependent country, Phuket faces an even bigger challenge in the upcoming high season.

“Any reopening plan must not only be well planned but has to win the hearts and minds of the Thai people to see any chance of success. While the island may hold the keys to the Kingdom in leading a restoration of tourism, the more critical issue is how hotels can fight for their lives in the current state of limbo,” Barnett said.

“Firstly, greater proactive dialogue between the public and private sector has to be undertaken. We can’t simply say we are now in unknown territory forever. Steps must be taken and a single voice formed,” Lark added.

“Secondly, the central has to look at interim measures to assist hotels with short-term operating bridge loans to weather the storm and retain jobs. Tourism is a human endeavour and without protecting and nurturing our Thai workforce there will be no recovery.”

Published : September 08, 2020

By : The Nation